Shopping Local: A Proven Economic Model

In the time I've worked for Local First Arizona I've come across many, many studies in my research that point to the benefits of supporting local business and dispel many of the myths disseminated by the large corporations or just from plain ignorance: national chains don't consistently have the best bargains, they often do not "bring more jobs" to a region without taking away even more, they don't have the same commitment to a region as locally-owned businesses, and their perceived convenience can carry high costs under the surface.

The greater monetary and cultural impact of the local businesses has been proven time and again... but don't take my word for it. Below are some of the studies that I've found most useful, feel free to cite them to anyone who really believes that doing a majority of their spending with the chains is convenient and isn't hurting anyone.

A Civic Economics study commissioned by Local First Arizona reveals that public procurement from a local supplier generates "dramatically greater local economic activity" than procurement from a chain business. This study compared the local economic impact of Wist Office Products, a local supplier and LFA member, with Office Max Contract, a division of Office Max, after the state of Arizona dropped Wist from its stable of office suppliers.

A 2009 study in New Orleans finds that shifting 10% of spending from chains to locally-owned businesses would create hundreds of new jobs and have the equivalent of injecting $60 Million annually in the form of recirculating currency.

A 2008 study in Michigan shows that shifting 10% of spending from chains to locally-owned businesses would create nearly $140 Million in new economic activity, add over 1600 new jobs to the area, and provide over $50 Million in new wages.

A 2007 study in San Francisco analyzes the market share of several categories to find out what percentage is held by chains or locally-owned businesses. It then calculates that if 10% of spending were shifted from chains to locals it would increase economic output by almost $192 Million, create almost 1300 new jobs, provide almost $72 Million in new income for workers, and create over $15 Million in additional retail activity.

A 2002 study in Austin found that for every $100 spent at a chain bookstore, the economic impact was $13, whereas when spent with a local bookstore the economic impact was $45. It also shows that local merchants spend a much larger portion of total revenue on local labor to run the enterprise and sell the merchandise, keep their modest profits in the local economy, and provide strong support for local artists and authors, creating further local economic impact.

A 2004 study (an extension of the Economic Impact study in Austin, 2002) compares the economic impact of ten Andersonville businesses and their chain competitors and finds that for every $100 in consumer spending with a local firm, $68 remains in the Chicago economy whereas for every $100 in consumer spending with a chain firm, $43 remains in the Chicago economy. The study also states that great care must be taken to ensure that public policy decisions do not inadvertently disadvantage locally owned businesses. Indeed, it may be in the best interests of communities to institute policies that directly protect them.

A 2003 study in Maine found that when residents of the Midcoast region spend $100 at a big box retailer, their purchase generates $14 in local spending by the retailer. That same $100 spent at a locally owned business generates $45 in local spending, or three times as much. Dollars spent at a local retailer support not only that store, but a variety of other local businesses, including local banks, accountants, printers, and internet service providers.

This 2002 study in Massachusetts finds that big box retail, shopping centers, and fast food restaurants cost taxpayers in Barnstable more than they make in revenue, where gains were made by specialty retail (including small businesses).

This 60 page publication by Stacy Mitchell of the New Rules Project details the importance of local business and points out the importance of community engagement to create downtown revitalizations, sustainable planning policies, and curbing urban sprawl.

Santa Fe Independent Business & Community Alliance and Angelou Economics

A 2003 Santa Fe study shows how national chains in that city are growing at a rapid rate, resulting in a large outflow of money from the local economy. It details how impact of dollars spent at independent businesses deliver two times the economic impact of spending at national chains.

32,000 Consumer Report readers were surveyed about their drugstores and pharmacies. Published in 2003, the findings showed that more than 85% of customers at independent drugstores were very satisfied or completely satisfied with the experience, with only a 58% approval for chain drugstores. Also the highest prescription prices were found at the national chains.

A 2006 study shows that 58% of Bellingham, WA citizens are aware of their Local First program and as a result are changing their purchasing habits. “These results are phenomenal. Normally, if 1 in 5 households claim familiarity with your program, and change their behavior because of it you would consider it a success. To have nearly 3 in 5 households attributing a behavior change to this program shows an amazing impact.” Dr. Pamela Jull, lead researcher.